Advance Auto bids fall short, sale unlikely-sources

NEW YORK An auction of Advance Auto Parts Inc (AAP.N) failed to attract bids that met its price expectations, making it unlikely the auto parts retailer will proceed with plans to sell itself, according to four people familiar with the matter.

Details on bids and management's valuation expectations could not be learned. The auction came to a standstill after the gap in price expectations between the parties proved too wide, two of the sources said.

The Roanoke, Virginia-based company had a market value of more than $5.7 billion as of Wednesday, up 10 percent since November 1 when news of a potential sale emerged. Its shares were down 6 percent to $73.30 Thursday morning on news of the disappointing auction.

The sources asked not to be identified because the matter is not public. Advance Auto, Carlyle, KKR and CD&R declined to comment, while Leonard Green did not immediately respond to requests for comment.

Blackstone Group LP (BX.N), which sources said was advising Advance Auto on a potential sale, declined to comment.

"In our view, the divide was driven by the size of the deal, which probably would have required more than $6.5 billion of total financing (both equity and debt) to complete, and management's expectation of a premium, since the stock had already reached a high of $93 earlier this year," Morningstar analysts wrote in a note on Thursday.

Advance Auto has been suffering from weak consumer demand for auto parts. Earlier this month it reported third-quarter operating income of $150.4 million, down 15.4 percent from a year earlier.

Founded in 1929 as a chain of home and auto supply stores, the company is a retailer of car parts, accessories, batteries, and maintenance items in the United States. It competes with companies such as O'Reilly Automotive Inc (ORLY.O), Autozone Inc (AZO.N) and Pep Boys (PBY.N).

In a research note published on November 9, JPMorgan Chase & Co (JPM.N) analysts wrote that they did not envision a strategic buyer stepping forward and that a financial sponsor was a more likely suitor.

They suggested a potential buyout could fetch $90 to $95 per share, given other deals in the retail sector.